Redfin Corporation stock. It fell to a record low on Monday after Oppenheimer’s Jason Helfstein advised investors to sell as he explained why he believes the real estate services company’s business model is flawed.
It was down 6.2% in premarket trading and was on track to open lower than October. It closed at an all-time low of $3.93 on February 20, 2022.
It has plunged 61.3% in the past three months through Friday and 91.9% in the past 12 months, with analyst Helfstein’s new price target suggesting it could lose another two-thirds of its value.
“We believe Redfin’s core business is fundamentally flawed in its agency fixed-cost model versus the industry’s 100 percent commission model,” Helfstein wrote in a note to clients.
Helfstein downgraded it to underperform after a strong performance over the past two years. He set a stock price target of $1.30, 67.7% below Friday’s closing price of $4.02.
He explained that Redfin’s business model prevents the company from optimizing profit margins when the housing market declines, and preventing it from gaining market share when the market rebounds.
That meant the company was six to 12 months behind the market, when soaring mortgage rates caused home sales to plummet.
Fannie Mae, the government-sponsored enterprise (GSE) that guarantees mortgages, said on Monday its home-buying confidence index fell for eight straight months to 56.7 in October, the lowest reading since the index was launched in 2011.
“[W]It is estimated that it will take about two years for housing demand to return to meaningful growth,” Helfstein wrote.
The stock has fallen 89.5% this year, while the S&P 500 SPX,
has fallen 20.9%.